Coinspeaker
US SEC Files Motion for Summary Judgment in Do Kwon Case
The United States Securities and Exchange Commission (SEC) is not backing down in its pursuit of justice regarding Terraform Labs’ alleged violations. Despite a jury’s conclusion that appeared to show leniency towards Do Kwon, the SEC has made a bold move by demanding a summary judgment on all the claims.
A Jury’s Controversial Verdict
A recent court filing unveiled the SEC’s reluctance to accept the jury’s verdict. The jury’s decision seemed to absolve Do Kwon of his involvement in facilitating the frauds that led to the eventual collapse of Terraform Labs.
In a direct challenge to the jury’s decision, the SEC’s filing, directed to the US District Court for the Southern District of New York, stated:
“No rational jury could conclude that Kwon was not liable for Terraform’s violations of Exchange Act Section 10(b) and Rule 10b-5 thereunder pursuant to Exchange Act Section 20(a).”
The SEC’s case centers on Kwon’s alleged involvement in misleading crypto investors by creating and marketing Terraform Labs and its in-house Terra (LUNA) tokens as securities. The commission insists that Kwon and Terraform Labs offered and sold securities, LUNA, and Mirror Protocol (MIR) in unregistered transactions, engaged in transactions involving mAssets, and committed fraud.
The SEC claims that Terraform Labs and Kwon misled investors by claiming that TerraUSD (UST), the algorithmic stablecoin, would remain pegged to the US dollar at a 1:1 ratio and that the firm’s crypto tokens, including LUNA, would appreciate in value over time.
The regulator, however, claims that these commitments were broken, as UST fell below its peg to the US dollar in May 2022. The failure to maintain the promised stability resulted in significant losses for investors who had placed their trust in Terraform and its founder’s promises.
In response to the SEC’s allegations, Do Kwon and Terraform Labs have asked the judge to dismiss the SEC’s lawsuit. They argue that Terra Classic (LUNC), TerraClassicUSD (USTC), MIR, and its mirrored assets (mAssets) are not securities as the SEC has claimed. Kwon’s defense maintains that their activities did not involve selling securities or committing fraud.
Terra Ecosystem’s Troubled Waters
The legal battle surrounding Terraform Labs is not without controversy. Terra co-founder Daniel Shin’s lawyer has blamed the “unreasonable operation of the Anchor Protocol and external attacks carried out by Do-hyung Kwon” for the Terra ecosystem’s collapse.
However, the company has recently pointed fingers at market maker Citadel Securities, accusing it of playing a role in a supposed “concerted, intentional effort” to depeg its UST stablecoin in 2022.
Citadel Securities, in response to these allegations, issued a statement denying any involvement. The market maker claimed that the accusations were based on false social media posts and ignored information that the company had already provided, confirming it had no role in the matter.
